This paper examines whether expenditure-based fiscal consolidation produces more favorable public debt sustainability outcomes than tax-based adjustment in Western Balkan countries. The analysis is based on a structured review of empirical studies dealing with fiscal consolidation, debt dynamics, and macroeconomic performance in Albania, Bosnia and Herzegovina, Montenegro, North Macedonia, and Serbia. In order to better interpret the regional experience, the paper also draws on selected comparative evidence from broader studies on transition economies and OECD countries. The reviewed literature suggests that the composition of fiscal adjustment matters considerably for debt sustainability outcomes. Consolidation strategies relying primarily on expenditure restraint appear to be associated with more durable debt reduction and lower macroeconomic costs than tax-based adjustments. By contrast, revenue-based or mixed packages often coincide with weaker debt stabilization effects, especially when implemented in fragile macroeconomic environments. The findings further indicate that expenditure-based adjustment is more likely to support debt sustainability when it targets inefficient or non-productive current spending while preserving public investment relevant for long-term growth.The paper also argues that the effects of fiscal consolidation in the Western Balkans cannot be understood independently of broader structural conditions. Initial debt levels, fiscal space, institutional quality, growth dynamics, and the composition of public expenditure all shape the final outcomes of consolidation efforts. The contribution of the paper lies in integrating fragmented empirical findings into a coherent analytical narrative that explains why expenditure-based consolidation appears to be the more suitable strategy for improving debt sustainability in small, open, and institutionally constrained economies of the region.

Read online

Download this PDF file

Alesina, A., Favero, C., & Giavazzi, F. (2019). Effects of austerity: Expenditure- and tax-based approaches. Journal of Economic Perspectives, 33(2), 141–162. doi:10.1257/jep.33.2.141.

Bartlett, W., & Prica, I. (2018). Debt in the super-periphery: The case of the Western Balkans. Third World Thematics: A TWQ Journal, 2(6), 825–844. doi:10.1080/23802014.2017.1438850.

Đurović-Todorović, J., & Đorđević, M. (2015). Results of fiscal consolidation in Republic of Serbia. Procedia Economics and Finance, 19, 110–121. doi:10.1016/S2212-5671(15)00013-1.

Kamberi, A., & Bexheti, A. (2025). Public debt and fiscal consolidation in the Western Balkans: A panel analysis of growth effects. European Journal of Government and Economics, 14(2), 147–163. doi:10.17979/ejge.2025.14.2.11181.

Krajišnik, M., Gligorić, D., & Gojković, B. (2019). Effects of fiscal consolidation in Western Balkan countries. Zbornik radova Ekonomskog fakulteta u Rijeci, 37(2), 527–551.

doi:10.18045/zbefri.2019.2.527.

Mirdala, R. (2013). Lessons learned from tax vs. expenditure based fiscal consolidation in the European transition economies. SSRN Electronic Journal. doi:10.2139/ssrn.2370481.

Petrović, P. i Brčerević, D. (2014). „Fiskalna konsolidacija – preduslov za rast”, Fiskalni savet Republike Srbije, Ekonomika preduzeća, 62(1–2)

Petrović, P., Brčerević, D. i Minić, S. (2017). „Fiskalna konsolidacija i privredni rast 2015–2017: plan, ostvarenja i pokretači”, Fiskalni savet Republike Srbije, Ekonomika preduzeća, 65(1–2)

Arsić, M. (2012). „Da li je Srbiji potrebna fiskalna konsolidacija i na koji način se ona može ostvariti”, Kvartalni monitor, br. 28, FREN.

Arsić, M., Nojković, A., & Ranđelović, S. (2013). Would economic recovery imply fiscal stabilization in Serbia?. Economics of Enterprise, 61(3-4),222-237. https://doi.org/10.5937/ekopre1304222A

Zvanične internet stranice:

https://financa.gov.al/en/

https://www.mft.gov.ba

https://www.gov.me

https://finance.gov.mk

https://www.mfin.gov.rs